European Commission to Investigate McDonald’s on Corporate Tax Evasion Suspicions
The European Commission (EC) is examining trade union allegations that the U.S. fast food giant McDonald’s avoided paying more than $1.1 billion in corporate taxes between 2009 and 2013. EU Competition Commissioner Margrethe Vestager recently told legislators that her office is “looking into the information gained by trade unions, when it comes to McDonald’s in order to assess if there is a case.”
The investigation, spurred by charges brought by a coalition of European and U.S. labor unions, alleges that the Illinois-headquartered company has reduced its corporate tax burden by moving its British headquarters to Switzerland and channeling money into a Luxembourg-based subsidiary with a Swiss branch.
The trade unions charge that the Luxembourg subsidiary, where 13 people work, had revenues over the five-year period of $4.1 billion and reported paying just $18 million in taxes.
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The Commission’s move is one in a series of the so-called ‘LuxLeaks’ allegations, dealing with “sweet tax deals” for multinationals with offices in Luxembourg that are supposedly shifting profits between countries to deprive EU governments of tax revenues.
Last year, the EC opened tax probes into the operations of several high-end U.S. firms—Apple and Starbucks in Ireland and The Netherlands, and Amazon in Luxembourg. As a result, the EC is working on new legislation that will require countries to automatically exchange information on their “tax rulings” every three months. Up to this point, EU member nations have rarely shared information about their tax decisions with the Commission and are often unaware of rulings made by their partners. This, the EC claims, creates a gap that some multinationals have exploited.